The calendar has finally flipped over to 2025. And with that, employers and their benefits teams are once again facing a laundry list of priorities to ensure that their employee benefits plans (EBPs) are well-maintained, and more importantly, that their plans meet regulatory expectations.
Employee benefit plans are not only challenging for internal teams to manage on a day-to-day basis, but because of intricate audit requirements, they also pose significant compliance pain points for teams to navigate as well – particularly for first timers.
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Adding to these headaches is the fact that audit requirements hinge on a variety of factors and thus create a very challenging web for even seasoned businesses and benefits teams to parse through. Moreover, as a result of the regulatory shifts that stemmed from the passage of the SECURE Act 2.0 in 2022, many organizations are still grappling with whether they need an audit in the first place – let alone what their requirements are.
So, with that, as the year begins, here are a few key best practices that can help organizations better understand their audit status and allow them to meet their expectations more seamlessly ahead of the deadline later this year.
Know the impacts of SECURE 2.0 on your audit status
Because of how varied employee benefit plans are, SECURE Act 2.0 was passed in hopes of clarifying the EBP process and lifting some of the audit burdens off of smaller employers. Specifically, with SECURE 2.0, a plan only requires an audit if it has over 120 account balances (initial audits) or 100 account balances (reoccurring audits). This is in contrast to previous guidance, where plans with 100 or more eligible participants at the start of the plan year were required to receive audits. Therefore, before going down the path of prepping for an EBP audit, make sure that you actually still require one under the new rule.
Refresh your knowledge of which benefit plans require audits
Many businesses offer a combination of benefit plans, so knowing which plans require audits and what specific requirements are early can be incredibly helpful in mapping out prep priorities and hitting the filing deadline for each. For example, each of the following plan types will require a business to file a separate Form 5500 Annual Return/Report of Employee Benefit Plan:
- Defined contribution plans (401(k), 403(b) and employee stock ownership plans
- Defined benefit pension plans
- Health plans
Employee benefit plan pre-extension checklist
For businesses that are uncertain about whether they are going to hit the July 31st deadline or not, it is important to benchmark progress and plan for contingencies – namely whether they need to file for a one-time extension, or Form 5558. Employee benefit plan audits can be stressful, and filing for an extension only prolongs this hectic process. Fortunately, there is a concise check list of items that business owners can keep in mind to assess whether they are on track to hit the initial deadline or determine whether they ultimately may need to file for an extension:
- Conduct a deep dive review of your benefit plans and determine their audit requirements and if any changes have occurred as a result of Secure 2.0. Also, make sure you have your finger on the pulse of each of your plans that need an audit to assess whether one or multiple may require an extension.
- Double check with your auditor on audit progress and confirm if you will meet the initial deadline, or if you need to submit Form 5558.
- File a Form 5558 for any impacted plans.
Brittany Carrier, CPA, Principal, UHY
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